 In this presentation, we will take a look at some multiple choice questions related to cash and internal controls. First question. Cash over short account A is needed when cash has a credit balance. Balance. B is used to record errors with petty cash. Cash. C is not necessary in a computerized accounting system. Bet? System? Betting system? D can never have a debit balance or E can never have a credit balance. Check balance. So we'll go through this one more time and then we'll see if we can cross some of the items out with the process of elimination. Cash over short account A is needed when cash has a credit balance. So the cash over short, if we think about it before we go through this, we probably want to give a quick think of what it is. We're really recording cash over short when we're recording a process where we have the cash register receipts. Recording how much cash we should have gotten in terms of cash sales and then we're having the physical count of cash and typically if those things don't line up, then we're going to have to record the difference somewhere and we typically record that to the cash over short account. So it's needed when the cash has a credit balance. Not necessarily the case here because cash typically won't have a credit balance. We might credit cash but it won't have a credit balance. So that's not it. B says it's used to record errors with petty cash. It's kind of what we're doing here. So because we are saying the cash is different for the physical count to what the register says. So we'll keep that for now. C says it's not necessary in a computerized accounting system. You might think that but really even if we're using a computerized accounting system it will be there even if we have the register and all the recording being done real time. We still have to physically count the cash and it may be off from what the register says. So it's not C. D says can never have a debit balance. And I'm just going to read E2. E says can never have a credit balance. So those two when we have two things that are totally the same except for that one word debit or credit we might think well either these two are eliminated each other or it's one of those two being different by that one word. So these two you kind of might get hung up on that one because oftentimes when we have two things that are just all totally the same but only have one word difference in a multiple choice series. A lot of times that'll be one of those will be the correct answer that different word being the difference. But in this case can never have a debit balance or a credit balance are both actually wrong because the cash over short could have a debit or credit. And that's the weird thing about the cash over short account. It doesn't have a normal type balance like most accounts do because it can flip to the debit side or credit side depending on whether the cash is over or short from what we set would report in the cash sales on the register. So it's actually not either of those and that leaves us with B here. So the question and answer cash over and short account B is used to record errors with petty cash. So that's what we're doing here that the sales receipt is showing something different than the cash collected and therefore we have to record that difference. That means an error has happened somewhere either with the reporting or with the cash collection. Next question when reimbursing the petty cash fund a cash is debited B expenses are credited C petty cash is debited D no expenses are recorded or E expense accounts are debited. Once again we'll read through it see if we can cross some of these items off when reimbursing the petty cash fund a cash is debited. When we reimburse it we're actually taking money out of the checking account so cash would be credited so it's not debit to cash B expenses are credited and expenses we could be doing something with expenses but we know debit expenses typically because they are debit balance accounts and they only go up within the debit direction so we're not going to credit the expenses. If we do anything we're going to debit expenses so I'm going to cross that out C petty cash is debited. Now that you may think that would be the case because so I'm going to keep that for now D no expenses are recorded and really this is the point in time that we do record the expenses so it's not that and E says expense accounts are debited and if we do anything to the expense accounts we would be debiting them because expenses typically go up in the debit direction. So we're left with C and E which are petty cash is debited and expense accounts are debited so let's read through this one more time when reimbursing the petty cash fund C sounds really good petty cash is debited and and it's a bit deceiving because we would be replenishing the petty cash fund and you would think that we would debit petty cash and credit the cash account but that's kind of the tricky thing we do with this with the petty cash to skip or reduce the number of journal entries we can just make a journal entry at the end of the time period which would debit all the expenses which would be E and then credit cash not touching petty cash at all meaning it still has like the original amount that we had put in there when we originally set up the petty cash fund and then instead of taking money you know recording all the receipts and reducing petty cash in a journal entry account and then reimbursing it again we can really do just one step and eliminate the duplication of the process by just recording the expenses and then a credit to the cash account so E will be the correct answer C actually not the one so we're going to have when reimbursing petty cash fund E expense accounts are debited next question procedures for verifying approving and recording obligations for eventual cash disbursements and for issuing checks for payment only of verified approved and recorded obligations is a internal cash system b petty cash system c cash disbursement system d cash control system or E a voucher system let's go through this one more time procedures for verifying approving and recording obligations for eventual cash disbursements and for issuing checks for payment only of verified approved and recorded obligations is internal cash system now if it's an internal control type system that would be more that might be something applicable but a internal cash system i don't think is correct petty cash system this sounds like it's going to be dealing with the normal cash payments not necessarily the petty cash which is really just used for the the minor cash payments so probably not that c cash disbursements system kind of sounds like we are dispersing cash in some way or paying for things so i'll keep that for now and d says cash control system uh there it could be a type of control and then e says the voucher system so and that sounds kind of reasonable too the voucher system is a type of internal control so uh over the payments of cash so c d and e let's read through it one more time procedures for verifying approving and recording obligations for eventual cash disbursements and for issuing checks for payment only of verified approved and recorded obligations is either cash disbursement system cash control system or the voucher system and of those three it's actually the voucher system it's going to be the correct answer so voucher system uh is going to be this this is in essence the definition of the voucher system